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Tag: 2023 News

Fraud Resulted in Doctors Implanting Fake $16,000 Pain Devices

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Prosecutors filed a two-count Indictment charging Laura Perryman, the former Chief Executive Officer of Stimwave LLC, a Florida-based medical device company, with a scheme to create and sell a non-functioning dummy medical device for implantation into patients suffering from chronic pain, resulting in millions of dollars in losses to federal healthcare programs.

Perryman, 54, of Delray Beach, Florida, has been charged with one count of conspiracy to commit wire fraud and health care fraud, which carries a maximum potential sentence of 20 years in prison, and one count of health care fraud, which carries a maximum potential sentence of 10 years in prison.

Stimwave was a medical device company that manufactured and distributed implantable neurostimulation devices designed to treat intractable, chronic pain.  Founded in 2010 by Perryman and others, Stimwave was headquartered in Pompano Beach, Florida. It was founded on the premise that its products would provide non-opioid alternatives to chronic pain management.

From at least in or about 2017 up to and including her termination in or about 2019, Perryman, as Stimwave’s CEO, engaged in a multi-year scheme to design, create, manufacture, and market an inert, non-functioning component of the Device – called the “White Stylet” – that served no medical purpose but was included with the Device through in or about 2020 in order to make the product financially viable for doctors to purchase.

When Stimwave originally brought the Device to market in or about 2017, it contained three primary components: (i) an implantable electrode array that stimulated the nerve; (ii) an externally worn battery that sat outside the body and wirelessly provided power to the Lead through the patient’s skin; and (iii) a separate implantable receiver measuring approximately 23 centimeters in length with a distinctive pink handle – called the “Pink Stylet.”  The Pink Stylet contained copper and, unlike the White Stylet, functioned as a receiver to transmit energy from the Battery to the Lead.

Stimwave sold the Device to doctors and medical providers for over approximately $16,000.  Medical insurance providers, including Medicare, would reimburse medical practitioners for implanting the Device into patients through two separate reimbursement codes, one for implantation of the Lead and a second for implantation of the Pink Stylet.  The billing code for implanting the Lead provided for reimbursement at a rate of between approximately $4,000 and $6,000, while the billing code for implanting a receiver, like the Pink Stylet, provided for reimbursement at a rate of between approximately $16,000 and $18,000.

Soon after the Device was released, physicians informed Stimwave that they were having trouble implanting the Pink Stylet in certain patients because the Pink Stylet was too long.  Stimwave and Perryman knew that the Pink Stylet could not be cut or trimmed to shorten it without interfering with the functionality of the Pink Stylet as a receiver, and without a receiver component for doctors to implant and seek reimbursement for, doctors would incur a substantial financial loss with every purchase of the Device, thereby making it more difficult for Stimwave to sell the Device to doctors and medical providers at the approximately $16,000 price.

However, Stimwave – at the direction of Perryman – did not lower the price of the Device so that its cost to doctors and medical providers could be covered by reimbursement for the implantation of only the Lead, nor did Perryman recommend that doctors not implant the Device or its receiver component in cases where the Pink Stylet could not fit comfortably.  Instead, Perryman directed that Stimwave create the White Stylet – a dummy component made entirely of plastic that served no medical purpose but which Stimwave misrepresented to doctors as a customizable receiver alternative to the Pink Stylet.  

The White Stylet could be cut to size by the doctor for use in smaller anatomical spaces and was created solely so that doctors and medical providers would continue to purchase the Device for use in those scenarios and continue to bill for the implantation of a receiver component.  To perpetuate the lie that the White Stylet was functional, Perryman oversaw training that suggested to doctors that the White Stylet was a “receiver,” when, in fact, it was made entirely of plastic, contained no copper, and therefore had no conductivity.  In addition, Perryman directed other Stimwave employees to vouch for the efficacy of the White Stylet, when she knew that the White Stylet was actually non-functional.

As a result of these misrepresentations regarding the functionality of the White Stylet, Perryman caused doctors and medical providers to unwittingly implant the non-functional White Stylet into patients and submit fraudulent reimbursement claims for implantation of the White Stylet to Medicare, resulting in millions of dollars in losses to the federal government.

Prosecutors announced the unsealing of a non-prosecution agreement with Stimwave, which filed for bankruptcy on June 15, 2022.Under the terms of the Agreement, Stimwave has accepted responsibility for its conduct by, among other things: (i) making admissions and stipulating to the accuracy of an extensive Statement of Facts; (ii) paying a $10,000,000 monetary penalty; and (iii) maintaining an adequate compliance program, to include employing a Chief Compliance Officer and holding regular compliance committee meetings. Stimwave is also required to cooperate fully with the Government.  Stimwave’s obligations under the Agreement will continue for a period of three years from the date of execution of the Agreement.  

The U.S. Attorney’s Office also unsealed a civil fraud lawsuit filed against Stimwave under the False Claims Act, and the parties’ settlement of that suit). The civil complaint also brings claims against Perryman under the FCA, which are pending.

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PAGA Penalties Expanded to Include Sick Pay Act Violations

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Kaiser Foundation Hospitals owns and operates hospitals and medical facilities throughout California. Ana Wood, a nonexempt employee, was paid hourly wages by Kaiser.

In February 2021, she filed a PAGA action against Kaiser alleging that as an aggrieved employee she was properly suited to act on behalf [of] the state, and collect civil penalties for all violations committed against other aggrieved Kaiser employees in California.

Her first cause of action claimed that Kaiser violated the California’s Healthy Workplaces, Healthy Families Act of 2014 by not paying sick leave at the correct rate. The second cause of action alleges that Kaiser wrongfully denied employees the right to use sick leave. In the third, Wood maintained that Kaiser violated Labor Code provisions regarding vacation pay.

Kaiser demurred to the first cause of action on the grounds that the California’s Healthy Workplaces, Healthy Families Act”does not authorize PAGA actions for civil penalties.” The court sustained the demurrer without leave to amend. Following voluntary dismissals (without prejudice) of the remaining causes of action, the court entered a judgment of dismissal in Kaiser’s favor.

The Court of Appeal (4th Dist.) reversed in the published case of Wood v. Kaiser Foundation Hospitals – D079528 (February 2023).

The procedural setting of this case perfectly framed the issue as one of statutory interpretation. The trial court sustained Kaiser’s demurrer without leave to amend, determining that a PAGA action is one brought “on behalf of the public” and since it seeks only civil penalties, is prohibited by Labor Code section 248.5, subdivision (e).

The last clause of section 248.5, subdivision (e) was the focus of this appeal. It provides that “any person or entity enforcing this article on behalf of the public as provided for under applicable state law shall, upon prevailing, be entitled only to equitable, injunctive, or restitutionary relief . . . .”

The Act (Labor Code, § 245 et seq.) generally requires employers to provide eligible employees with at least three paid sick days per year. The Labor Commissioner and the Attorney General are charged with enforcing this law. Violators may be assessed compensatory as well as liquidated damages, plus civil penalties.

In particular, did the Legislature mean to include – and thus restrict – actions by aggrieved employees to recover civil penalties under the Labor Code Private Attorney General Act of 2004 (PAGA) (§ 2698 et seq.) as defendant Kaiser contends? Or instead, as plaintiff Ana Wood argues, did the Legislature have in mind an entirely different statutory scheme, the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.)?

The Court noted that the phrase “enforcing this article on behalf of the public” in section 248.5, subdivision (e) is ambiguous. It is susceptible of at least two possible meanings. It could refer to a PAGA action, because relief under PAGA has been characterized as being “designed primarily to benefit the general public, not the party bringing the action.”

But how PAGA relief has been characterized by the courts and who it “primarily” benefits does not necessarily indicate that the Legislature had PAGA in mind when it referred to “enforcing this article on behalf of the public.” It might have instead been describing an action alleging a claim under the UCL, which can be brought on behalf of the public by various government officials, and in which even private individuals can seek public injunctive and restitutionary relief.

The Court of Appeal concluded that “the statute’s text and history provide compelling evidence that the phrase “on behalf of the public as provided under applicable state law” in section 248.5, subdivision (e) was intended to refer to actions prosecuted under the UCL – not PAGA. Accordingly, it reversed the judgment of dismissal.

This case is being closely followed by the employment law community, and will likely be appealed to the California Supreme Court. However, at this time it is a binding precedential decision.

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Insulin Pricing Controversies Move From Drug Makers to PBMs

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According to an article in The Lancet, retail insulin prices (the amount one pays without insurance) have skyrocketed. Between 2007 and 2018, the cost of some insulin products has increased by more than 200%. People with little-to-no health insurance coverage have reported paying more than $1000 per month when higher insulin doses are required.

In response to the crisis triggered by high prices, the state of California is investing in making their own low-cost insulin and the New England Journal of Medicine reports  a non-profit company is hoping to bring affordable insulin to the market. These two plans could potentially bestow on some who require insulin the kind of insulin accessibility that patients in all other high-income countries enjoy.

Civica Rx, a nonprofit company in Lehi, Utah, said last March that it plans to make and sell generic versions of insulin to consumers at no more than $30 per vial and no more than $55 for a box of five pen cartridges.

Following the political pressure on this issue over the last few years, Eli Lilly & Co.’s announcement this March that it is slashing prices for its major insulin products, perhaps hoping to ease some pressure on Big Pharma according to a report by . Kaiser Health News.

In 2018, Novo Nordisk, amid public rancor over rising insulin prices, considered a 50% cut, according to the report. But the company’s board decided against it, noting that “many in the supply chain will be negatively affected ($) and may retaliate.” The company also feared that irate insurers might retaliate against Novo’s blockbuster diabetes and weight-loss drugs like Ozempic, which compete against Lilly’s Mounjaro.

Sanofi and Novo Nordisk did not directly respond to Lilly’s price-dropping move but noted, in statements, that their discount programs already provide cheap insulin for those who need them. Millions of Americans have used these coupons, but patients say they come with red tape and can be unreliable.

The three big insulin makers have fought off competition that could lower prices across the board. They’ve done this, for example, by introducing their own, slightly less expensive “authorized generics,” which discourage other companies from entering the insulin market. It wasn’t until 2021 that a competitor brought a long-acting “biosimilar” insulin – essentially a generic version of Lantus – to the market, and it has barely made a dent. The company, Viatris, which since sold its product to Biocon Biologics, did win entry to one formulary by creating an essentially identical product, tripling its list price and offering PBMs a big rebate.

Kaiser Health News says that insulin has come to embody the perversity of the U.S. health care system as list prices for the century-old drug, which 8.4 million Americans depend on for survival, quintupled over two decades to more than $300 for a single vial. Just because Lilly – which sells about a third of the insulin in the United States – lowers its price doesn’t mean all patients will pay less, even in the long run.

These kinds of behaviors have increasingly drawn congressional attention, and drug manufacturing attack ad campaigns, and it also casts light on the profiteering methods of the drug industry’s price mediators – the pharmacy benefit managers, or PBMs – at a time when Congress has shifted its focus to them.

Drugmakers have long ceased to be the only, or even primary, villain of the insulin price scandal. The three companies that produce nearly all the insulin in this country – Lilly, Sanofi, and Novo Nordisk – posted stagnant or declining revenue from their versions of the drug in recent years despite the steadily climbing list prices they charged. They’ve even advised investors that they don’t see insulin sales as a high-profit area anymore.

The focus is now upon the gigantic pharmacy benefit managers – owned by CVS Health and insurance giaInts UnitedHealthcare and Cigna – that have aggressively played the insulin makers off one another in a way that mainly fattened their own accounts, as was revealed in a scathing 2021 Senate Finance Committee report.

In theory, when pharmacy benefit managers negotiate contracts with drug manufacturers on behalf of insurers, they pass along savings to patients. In practice, while the hard-nosed bargaining may benefit the well-insured, it can hurt patients on fixed incomes and others less able to afford their insulin.

To compete for access to insured patients, according to the report, the three insulin makers in the 2010s steadily increased rebates and fees paid to the powerful PBMs, which are owned by or allied with major insurers. This spurred drugmakers to keep raising their list prices, because the more they paid in rebates – calculated as a percentage of list price – the better their placement on insurance formularies, the complex lists of drugs insurers cover for patients.

In other words, the more the insulin makers compete, the more consumers – the unlucky ones, anyway – may pay.

Most of the insulin list price increases have gone to PBMs, the go-between companies. For example, Lilly earned about $25 for each Humalog injection pen from 2013 to 2018, while the list price increased from $57 to $106. Net prices have remained stable the past few years and insulin revenues actually declined last year, according to recent Sanofi and Lilly financial reports.

Trade secrecy makes it hard to see which portions of the kickbacks end up as profit or savings for pharmacy benefit managers, insurers, pharmacies, or patients. But patients who are uninsured, are underinsured, or pay high deductibles can end up with whopping insulin bills, because their copayments are tied to the drug’s list price.

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Jury Convicts Orthopedic Surgeon for Kickbacks After Six-Day Trial

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An orthopedic surgeon has been found guilty by a federal jury of accepting more than $315,000 in bribes and kickbacks for performing spinal surgeries at a now-defunct Long Beach hospital whose owner was imprisoned for committing a massive workers’ compensation insurance fraud, the Justice Department announced today.

Dr. David Hobart Payne, 65, of Irvine, was found guilty late Friday afternoon at the conclusion of a six-day trial. The jury found Payne guilty of one count of conspiracy, two counts of honest services wire fraud, and one count of use of an interstate facility in aid of bribery.

A five-count superseding indictment returned by a federal grand jury on April 25, 2018 alleged that Payne was paid approximately $450,000 to steer more than $10 million in kickback-tainted surgeries to Pacific Hospital of Long Beach.

According to court documents and evidence presented at trial, Michael Drobot “the owner of Pacific Hospital ” conspired with doctors, chiropractors, and marketers to pay kickbacks and bribes in return for the referral of patients to Pacific Hospital for spinal surgeries and other medical services.

These services and surgeries were paid for primarily through the California workers’ compensation system. During its final five years, the scheme resulted in the submission of more than $500 million in medical bills for spinal surgeries involving kickbacks.

Payne received bribes from Drobot of up to $15,000 for each spinal surgery that he performed at Pacific Hospital. The top bribe payment was for lumbar spinal surgeries Payne performed on patients at Pacific Hospital with implants from one of Drobot’s companies. Drobot and Payne covered up the bribes by disguising them as payments for marketing services and fees based on a sham contract.

In total, Payne received more than $315,000 in illegal payments.

Nonetheless, according to the Medical Board of California, his license G 62826 is still renewed and current. No evidence of any disciplinary action appears to have been taken against him.

In April 2013, law enforcement searched Pacific Hospital, which was sold later that year, bringing the kickback scheme to an end.

To date, 24 defendants, among them doctors and surgeons, have been convicted for participating in the kickback scheme.

United States District Judge Josephine L. Staton scheduled a June 2 sentencing hearing, at which time Payne will face a statutory maximum sentence of 50 years in federal prison.

The FBI, IRS Criminal Investigation, United States Postal Service Office of Inspector General, and the California Department of Insurance investigated this matter.

First Assistant United States Attorney Joseph T. McNally and Assistant United States Attorneys Billy Joe McLain and Hava Mirell of the Violent and Organized Crime Section are prosecuting this case.

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Home Health Care Provider Cited for $9M for Employee Misclassification

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The Labor Commissioner’s Office has cited Feld Care Therapy, Inc., located in Westlake Village, $9,041,100 for willfully misclassifying 1,280 speech, physical and occupational therapists as independent contractors. The part-time workers, who traveled to clients’ homes to provide care, were not given paid sick leave or California’s COVID-19 Supplemental Paid Sick Leave (SPSL) as required by law.

The Labor Commissioner’s Office opened its investigation into Feld Care Therapy, Inc., dba FeldCare Connects, in November 2020 after receiving a report of labor law violation that the company was incorrectly classifying employees as independent contractors. The Labor Commissioner’s Bureau of Field Enforcement conducted an audit of the company’s records from 2019 to 2022 and uncovered the willful misclassification and other violations, including workers not being provided with complete itemized wage statements.

Feld Care Therapy, Inc. and CEO Randi Peled are jointly and severally liable for $1,134,500 in damages owed to the 1,280 workers and a civil penalty of $1,677,500 for the violation of the itemized statement provision.

Feld Care Therapy, Inc. is liable for damages of $1,707,350 for failure to provide written notice of sick leave balance/usage, $1,554,850 for the violation of the supplemental sick leave provisions and $256,900 for paid sick leave recordkeeping requirements. Feld Care Therapy, Inc. is also liable for civil penalties of $2,710,000 for willful misclassification of employees as independent contractors. Civil penalties collected are transferred to the State’s general fund as required by lCEO Randi Peledaw.

Misclassification occurs when an employer improperly classifies their employees as independent contractors to avoid paying minimum wage, overtime or payroll taxes. A misclassified worker is denied the legal right to workers’ compensation coverage if injured on the job, the right to family leave, the right to unemployment insurance, the right to organize or join a union, and protection against employer retaliation. Misclassification also undermines businesses that play by the rules.

Enforcement investigations typically include a payroll audit of the previous three years to determine minimum wage, overtime and other labor law violations, and to calculate payments owed and penalties due.

In perhaps a related civil action, Arizona Graves filed a lawsuit in the Los Angeles Superior Court on September 20, 2021 against Feld Care Therapy, Inc. and its CEO Randi Peled, on behalf of herself and other aggrieved employees under the Public Attorney General Act.

She claimed she was employed by Feld Care Therapy from February 2019 until April 2020. She alleges that they failed to compensate her for all hours worked, missed meal periods and rest breaks. She also alleges that defendants failed to provide accurate wage statements, failed to keep accurate records, failed to pay overtime premiums, failed to pay at least minimum wage, did not pay all wages due upon resignation, and did not reimburse employees for necessary business expenses.

Prior to commencing a civil action for PAGA recovery, “[t]he aggrieved employee or representative shall give written notice by online filing with the Labor and Workforce Development Agency and by certified mail to the employer of the specific provisions of this code alleged to have been violated, including the facts and theories to support the alleged violation.” Lab. Code § 2699.3. One might assume that this notice was indeed provided as required.

Both parties filed a Request for Dismissal of this Action in August 2022, and the case was accordingly dismissed. It is worthy of note that the Labor Commissioner’s office opened its investigation into the case in November 2020, which predates the filing of her civil action.

Labor Code § 2699.3 (2)(a)(i) provides that “If the division issues a citation, the employee may not commence an action pursuant to Section 2699”. Thus her PAGA civil action she filed would at this time be inconsistent with the Citation which was announced to the public on on March 7, 2023, and consistent with the Request for Dismissal filed by both parties in the Civil Action.

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No Equitable Contribution Between Employer’s GL and Comp Carriers

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Byron Remeyer and Asia Torres both worked for the La Sirena Grill at its South Laguna location. One night in August 2013, they had drinks together at La Sirena and then left around 10:00 p.m. to go to a party. Shortly before midnight, Torres, who was intoxicated, drove his vehicle into a tree in Laguna Niguel. Remeyer, his passenger, suffered traumatic, life-altering brain injuries as a result.

Remeyer filed a complaint against La Sirena and Torres for negligence. He alleged that Torres was employed as a cook for La Sirena and “got drunk on the job” on the night of the accident, that drinking on the job was a common occurrence at La Sirena, that La Sirena provided the alcohol that Torres drank on the night of the accident, that La Sirena’s management was well aware of Torres’s intoxicated state when Torres and Remeyer left for the party, and yet management did nothing to prevent Torres from driving. Remeyer also alleged that Torres was acting within the course and scope of his employment for La Sirena at the time of the accident, and was driving a vehicle that La Sirena had entrusted to him for performing his job duties. The complaint did not mention that Remeyer was also an employee of La Sirena.

La Sirena was insured by two different insurers. California Capital Insurance Company issued La Sirena a commercial general liability (CGL) policy with bodily injury limits of $2 million per occurrence; this policy generally covered bodily injury claims, but excluded coverage for workers’ compensation claims and for bodily injuries arising out of and in the course of a claimant’s employment with La Sirena.

The second insurer, appellant Employers Compensation Insurance Company (ECIC), issued La Sirena a workers’ compensation and employers’ liability policy. Part One of this policy covered workers’ compensation claims, and Part Two covered bodily injury claims by employees arising out of and in the course of their employment with La Sirena if not otherwise covered by workers’ compensation.

La Sirena tendered the Remeyer lawsuit to its CGL insurer, California Capital. California Capital agreed to defend La Sirena under a reservation of rights citing, among other provisions, its employer’s liability exclusion for bodily injuries arising out of and in the course of a claimant’s employment with La Sirena.

During discovery, it came to light that Remeyer had been an employee of La Sirena at the time of the accident, that both Remeyer and Torres had worked at La Sirena earlier in the day, but that both had been off the clock for several hours by the time the accident occurred. Whether Remeyer was acting within the course and scope of his employment at La Sirena at the time of the accident (a question relevant to the applicability of California Capital’s employer’s liability exclusion) remained contested.

California Capital incurred roughly $88,000 in attorney fees defending the claims against La Sirena. Then, in June 2015, California Capital settled the Remeyer lawsuit on La Sirena’s behalf for its policy limits of $2 million, without any participation from ECIC. California Capital then filed the subject lawsuit against ECIC for equitable contribution. ECIC moved for summary judgment, asserting neither part of its policy covered the allegations in the Remeyer lawsuit; the trial court denied that motion without explanation.

The trial court conducted a bench trial on stipulated facts in December 2020. The court found the ECIC policy potentially covered the Remeyer lawsuit and California Capital was equitably entitled to half of what it expended in defense and settlement of that lawsuit. The court then entered judgment for California Capital, awarding it $44,182.42 in equitable contribution for the cost of defending La Sirena, $1 million in equitable contribution for indemnifying La Sirena, and interest of $501,299.37.

The Court of Appeal reversed in the unpublished case of Cal. Capital Ins. Co. v. Employers Compensation Ins. Co -G060532 (March 2023)

The issue on appeal is straightforward: is California Capital entitled to equitable contribution from ECIC for the cost of defending and indemnifying their common insured, La Sirena?

Equitable contribution (not to be confused with equitable subrogation or equitable indemnity) is a loss sharing procedure by which an insurer that defended and settled a claim against its insured may seek to apportion those costs among coinsurers who refused to settle or defend the claim.

Equitable contribution permits reimbursement to the insurer that paid on the loss for the excess it paid over its proportionate share of the obligation, on the theory that the debt it paid was equally and concurrently owed by the other insurers and should be shared by them pro rata in proportion to their respective coverage of the risk. (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279)

Equitable contribution is only available if the two insurers share the same level of liability on the same risk as to the same insured. In this case California Capital’s CGL policy does not cover the same risk as ECIC’s workers’ compensation and employers’ liability policy. In fact, the two policies are mutually exclusive.

The judgment for California Capital was reversed. On remand, the trial court was directed to enter judgment for ECIC.

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Santa Ana Recovers $96K From Police Officer Convicted for Comp Fraud

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A 39-year old Santa Ana police officer convicted of committing workers’ compensation insurance fraud for continuing to accept his full pay without working even though he was physically capable of returning to work has repaid the City all of the stolen wages as a result of efforts by the Orange County District Attorney’s Insurance Fraud unit. The total amount repaid in restitution was $95,870.

On October 5, 2017, Santa Ana Police Officer Jonathan Ridge was injured on duty while in pursuit of a suspect driving a stolen vehicle.  On that day, October 5, 2017, Ridge went out on disability leave due to his injuries. On May 2, 2018, while still on leave, Ridge had surgery on his left wrist, and his doctor continued to keep him off work while he was recovering from the surgery.

In November 2018, Ridge was released by a doctor to return to work with restrictions. The work restrictions were too severe for the City of Santa to accommodate, despite the City of Santa Ana having an extensive return-to-work program for injured employees. This resulted in the City of Santa Ana being required to continue to pay Ridge Total Temporary Disability and for Ridge to receive disability payments through an insurance policy, resulting in Ridge receiving 100% of his pay without working.

From March 2019 to May 2019 the City of Santa Ana authorized surveillance on Ridge because he did not seem to improve despite having had surgery on his wrist in May 2018 for injuries sustained in the on-duty collision 18 months earlier.

The surveillance and subsequent investigation found that Ridge was engaging in activities well beyond what the doctor had imposed.  Ridge began attending college classes nearly full-time beginning in June 2018 – just weeks after his surgery. Additionally, he packed up his car and drove to Utah, went to the beach, and drove his motorcycle.

Ridge failed to disclose to his doctor or to the City of Santa Ana what he was actually capable of doing. This deprived the doctor of the opportunity to impose realistic work restrictions that the City of Santa Ana could accommodate.  Instead, Ridge continued to receive 100% of his pay without working even though he was capable of returning to work in a modified position.

Ridge pleaded guilty on April 16, 2021 to three felony counts of insurance fraud and one felony count of making a fraudulent statement to obtain compensation.  He had faced a maximum sentence of eight years in state prison if convicted on all counts. Ridge was sentenced to 180 days in the Orange County Jail with the sentenced stayed if he paid back the stolen wages in a timely manner.

Senior Deputy District Attorney Pamela Leitao of the Insurance Fraud Unit prosecuted this case.

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Good Faith Belief of Compliance Precludes Penalties & Attorney Fees

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Spectrum Security Services, Inc., provides secure custodial services to federal agencies. The company transports and guards prisoners and detainees who require outside medical attention or have other appointments outside custodial facilities.

Gustavo Naranjo was a guard for Spectrum. Naranjo was suspended and later fired after leaving his post to take a meal break, in violation of a Spectrum policy that required custodial employees to remain on duty during all meal breaks.

Naranjo filed a putative class action on behalf of Spectrum employees, alleging that Spectrum was required to report the premium pay on employees’ wage statements and timely provide the pay to employees upon their discharge or resignation, but had done neither. The complaint sought an additional hour of pay – commonly referred to as “premium pay” – for each day on which Spectrum failed to provide employees a legally compliant meal break.The complaint sought the damages and penalties prescribed by statutes as well as prejudgment interest.

After a remand from the Court of Appeal (Naranjo I v. Spectrum Security Services, Inc. (2009) 172 Cal.App.4th 654) on several issues, the trial court certified a class for the meal break and related timely payment and wage statement claims and then held a trial in stages. The trial court entered judgment for the plaintiff class on the meal break and wage statement claims and awarded attorney fees and prejudgment interest at a rate of 10 percent.

Both sides appealed. The Court of Appeal affirmed the trial court’s determination that Spectrum had violated the meal break laws but reversed the court’s holding that a failure to pay meal break premiums could support claims under the wage statement and timely payment statutes. It also ordered the rate of prejudgment interest reduced from 10 to 7 percent. (Naranjo II v. Spectrum Security Services, Inc. (2019) 40 Cal.App.5th 444).

The California Supreme Court disagreed with the Court of Appeal, decision in Naranjo II, and concluded that the extra pay constitutes wages subject to the same timing and reporting rules as other forms of compensation for work, but agreed that the 7 percent default rate set by the state Constitution applies. (See Cal. Const., art. XV, § 1.) in its opinion in Naranjo III v Spectrum Security Services Inc. (2022) 13 Cal.5th 93.

The Supreme Court then remanded the matter back to the Court of Appeal to resolve two issues the parties addressed in their respective appeals, but that it did not reach based on its conclusion about the nature of missed-break premium pay: (1) whether the trial court erred in finding Spectrum Security Services, Inc. (Spectrum) had not acted “willfully” in failing to timely pay employees premium pay (which barred recovery under § 203); and (2) whether Spectrum’s failure to report missed-break premium pay on wage statements was “knowing and intentional,” as is necessary for recovery under section 226. (Naranjo III v. Spectrum Security Services, Inc., supra, 13 Cal.5th at p. 126.)

The Court of Appeal noted that during the bench trial involving several of Spectrum’s affirmative defenses,.Spectrum argued state labor laws do not apply to the class members because they were working on federal enclaves and/or performing federal functions such that they should be treated as federal employees.

In the second phase of trial, the meal break class cause of action was tried to a jury. Naranjo did not dispute that Spectrum had always required on-duty meal periods as company policy because of the nature of its guards’ work but argued that Spectrum did not have a valid written on-duty meal break agreement with its employees. The jury found Spectrum not liable for the period beginning on October 1, 2007, after Spectrum had circulated and obtained written consent to its on-duty meal break policy.

After receiving supplemental briefing following remand, the Court of Appeal in its published opinion in Naranjo IV v Spectrum Security Services Inc. (2023) – B256232A, concluded that: (1) substantial evidence supports the trial court’s finding that Spectrum presented defenses at trial – in good faith – for its failure to pay meal premiums to departing employees and therefore, Spectrum’s failure to pay meal premiums was not “willful” under section 203; and (2) because an employer’s good faith belief that it is in compliance with section 226 precludes a finding of a knowing and intentional violation of that statute, the trial court erred by awarding penalties, and the associated attorneys’ fees, under section 226.

Although district courts in California are divided on the question, the majority view is that an employer’s good faith belief it is not violating the California Labor Code precludes a finding of a knowing and intentional violation. In this case the Court of Appeal agreed “with the weight of authority that a good faith dispute over whether an employer is in compliance with section 226 precludes a finding of a knowing and intentional violation.”

It was unpersuaded by the approach Naranjo advanced, and that a minority of federal district courts have adopted, which is that “knowing and intentional” is a “minimal standard” that may be satisfied by simply showing an employer provided an inadequate wage statement not as a result of clerical error or inadvertent mistake.

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JAMA Study Shows Increasing Surgical Procedures in Outpatient Settings

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A new retrospective cohort study – Performance of General Surgical Procedures in Outpatient Settings Before and After Onset of the COVID-19 Pandemic – confirmed that some common general surgeries had the biggest migrations to the outpatient setting during the first year of the COVID-19 pandemic. And this is likely a favorable trend perhaps reducing the costs of worker’s compensation medical claims.

Compared with the previous few years, calendar year 2020 saw disproportionately more outpatient cases of mastectomy for cancer, minimally invasive adrenalectomy, thyroid lobectomy, breast lumpectomy, minimally invasive ventral hernia repair, minimally invasive sleeve gastrectomy, parathyroidectomy, and total thyroidectomy.

For the present retrospective cohort study, Thiels and colleagues analyzed case volumes for the 16 most common general surgeries in the ACS National Surgical Quality Improvement Program (NSQIP). Outpatient procedures were defined as those that had patients discharged the same day as their procedure.

Patients were split between the 823,746 who received surgery prior to the COVID-19 pandemic (January 2016 through December 2019) and the 164,690 patients who had surgery during the pandemic (January through December 2020). The study population had an average age of 54.5 years and 58.1% were women.

According to a report on this study published by MedPage Today, the increase in outpatient volumes from 2016 to 2020 was deemed clinically significant for the following four procedures:

– – Mastectomy for cancer: 9.2% to 28.6%
– – Thyroid lobectomy: 43.2% to 57.9%
– – Minimally invasive ventral hernia repair: 58.8% to 69.4%
– – Parathyroidectomy: 51.8% to 61.8%

Driving the accelerated transition to outpatient surgeries was the need to simultaneously meet the needs of the massive influx in patients, a result of the COVID-19 pandemic, while still accepting and treating patients in need of non-urgent surgery, according to Cornelius Thiels, DO, MBA, surgical oncologist at the Mayo Clinic in Rochester, Minnesota, and coauthors, writing in JAMA Network Open.

As U.S. hospitals were beginning to buckle under limited resources and the need to mitigate SARS-CoV-2 exposure, the American College of Surgeons (ACS) and other organizations published elective case triage guidelinesopens in a new tab or window in early 2020.

“These guidelines recognize that postoperative inpatient admission uses key hospital resources that need to be allocated toward the care of acutely unwell patients with COVID-19 and exposes patients undergoing routine surgery to the risk of nosocomial COVID-19 infection,” Thiels and colleagues noted.

Adrian Diaz, MD, general surgery resident at The Ohio State University in Columbus, said the study’s findings are consistent with his group’s reported experience before and since the pandemic, and that the trends may continue for years.

Diaz suggested that outpatient surgery may be the preference for many patients. “Often times outpatient surgery is logistically more convenient and patients can return home and to normalcy much faster. Finally, outpatient surgery is often less resource intensive and thereby less expensive, leading to less cost to patients.”

“I believe this study is further evidence that more and more surgery is moving to an outpatient setting. Although this study did not assess safety or outcomes, the trends in the study demonstrate that most providers feel comfortable performing these operations in an outpatient setting,” he told MedPage Today.

The pandemic-era rise of outpatient procedures reportedly also extends to minimally invasive procedures like percutaneous coronary intervention and transcatheter aortic valve replacement, other groups have shown.

Data from the ACS-NSQIP-participating hospitals may not be fully representative of the entire U.S. population, the investigators acknowledged. Another limitation was the possibility of confounding due to surgical patients during the pandemic being sicker overall.

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Wallmart, Best Buy, Dollar General Announce Health Care Expansion

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Walmart Health announced that it is expanding into two new states and opening 28 centers in 2024. This will expand Walmart Health’s footprint into two new states – Missouri and Arizona – and deepen its presence in Texas. By the end of 2024, it will have more than 75 Walmart Health centers across the United States.

The company also says it i changing the physical footprint and layout of the center so patients spend less time in the waiting room and more time with their doctor. It also integrated modern equipment and technology to enable our providers and patients alike to experience what it claims is best-in-class healthcare technology. This includes integrating Epic’s electronic health record system across Walmart Health locations.

With 90% of the U.S. population located within 10 miles of a Walmart, Walmart Health is in a unique position to provide health and wellness services where its neighbors already live and shop.

The new state-of-the-art facilities will be approximately 5,750 square feet, located inside Walmart Supercenters, and will feature Walmart Health’s full suite of health services. The range of services include primary care, dental care, behavioral health, labs and X-ray, audiology and Walmart Health Virtual Care telehealth services.

Electronics retailer Best Buy recently kicked off a partnership with Atrium Health, part of Advocate Health, one of the country’s largest nonprofit hospital systems, Best Buy Chief Executive Officer Corie Sue Barry announced Thursday on a call with analysts. The partnership combines Atrium’s hospital-at-home program with Best Buy’s technological services, she said.

The partnership combines Atrium’s hospital-at-home program with Best Buy’s technological services, she said.

Best Buy has been investing heavily in health care services over the last few years as an alternative revenue stream to electronics sales, and has made several acquisitions in the sector, the most notable being its $800 million purchase of senior-citizen focused GreatCall Inc in 2018.

In 2021, the company also bought Current Health, a home-care technology platform that offers monitoring through wearable devices. “The role of technology within health care is becoming more important than ever, and our strategy is to enable care at home for everyone,” Barry said.

Dollar General is expanding into healthcare services in what could be a competitive shot across the bow for drugstores and other retailers. The company is piloting mobile health clinics at three stores in Tennessee to provide customers with basic, preventive and urgent care services along with lab testing.

The discount retailer teamed up with DocGo, a provider of mobile health and transportation services, to provide the medical services, which are set up in large vans in store parking lots.

The two companies plan to evaluate customer response and determine the feasibility of expanding the mobile health clinic offering to additional stores, executives said in a press release. Customers can schedule appointments online or walk in without an appointment. The retailer noted at the time that 75% of the U.S. population lives within about five miles from a Dollar General store, providing unique access to rural and other communities often underserved in the current health care ecosystem.

Health spending – projected to reach $5.2 trillion nationally by 2025, according to the U.S. Centers for Medicare and Medicaid Services – has become an alluring growth avenue for some retailers.

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